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The idea seems wonderful: If America increases the minimum wage
to $10.10, we can cut poverty in half. As The Huffington Post crowed, such an
increase, from the current federal minimum of $7.25, would
“drastically alter the lives of the country’s working poor.”

In fact, according to HuffPo, a $10.10 level would have pushed a
whopping 58 percent of this country’s working poor out of
poverty. Just like that.

But are those numbers accurate? Time to play a game of Follow the
Bouncing Ball, or, in this case, follow the citation and link, to
find the derivation of this figure. After all, if something so
simple could essentially cure poverty for more than half of
Americans, it is worth at least a few hours of research, no?

HuffPo, to be fair, didn’t make the claim itself. Rather, it
cited something called the Restaurant Opportunities Centers
United, which it describes as “an advocacy group focusing on the
restaurant industry.” That focus, by the way, is on increasing
unionization for restaurant workers.

The ROCU report cited is Realizing the Dream: How the Minimum
Wage Impacts Racial Equality in the Restaurant Industry and in
America. Ultimately, the report blames a low minimum wage for widespread
poverty and racial inequality.

Indeed, that report claims a higher minimum wage (which, one
assumes, would also equate to higher union dues) would save
millions from poverty, but not 58 percent. “Nearly six million
workers would be lifted out of poverty if the minimum wage were
raised to $10.10 as has been proposed by Congress, of which 60
percent, or over three and a half million would be people of
color,” according to the authors. There is a 58 percent figure
mentioned, but it has to do with the racial makeup of restaurant
workers affected: 58 percent of workers below the poverty line,
according to the report, are people of color.

So, HuffPo didn’t cite ROCU correctly. To be fair, though, a
chance to lift 6 million people out of poverty would be great.
So, what data did ROCU crunch to come up with that figure? Well,
ROCU didn’t. Instead, in footnotes to its report, it discloses it
relied on “IWPR analysis of 2012 CPS-ASES.”

What is IWPR? That is the Institute for Women’s Policy Research,
a liberal think tank that helped write the report with ROCU. A
search on IWPR’s site shows that it has done a report on raising the minimum wage and
its effect on women in the restaurant industry – citing the
work of ROCU and written by a college intern. It does note
that there are “studies” that show “raising the federal
minimum wage – which has not changed since 2009 – to just
$10.10 per hour would pull more than half of the nation’s
working poor out of poverty.”

Conveniently, that post links to studies, but not the IWPR’s
analysis, but rather to a brief commentary by a researcher from
the Economic Policy Institute in 2011 that doesn’t mention
what a higher wage will do to poverty levels.

That turns out just to be simply sloppy research on the part of
the college intern. One assumes she apparently linked to the
wrong report. The EPI indeed looked at the impact of a $10.10 minimum wage, but
it never said how many people would rise above poverty levels
as a result. Instead, it noted that a hike would raise wages
for about 30 million workers, lead to $51 billion in
additional wages, and actually cause gains to gross domestic
product and job creation.

Why? Well, as business owners know, there is a finite amount of
money to pay workers. If you are breaking even with a staff of 10
all making $7.25 an hour, you need to reduce that same staff to
seven to maintain your current budget with a wage of $10.10. So,
seven of your workers do well, and bring home more to help their
families. Three find themselves going deeper into poverty.

Of course, it is rarely a zero-sum game. Businesses can adjust to
changes in wages beyond simply firing workers. They can raise
prices, for instance, or simply lower profit forecasts, accepting
higher wage costs. But they could also decide that investing in
productivity is a better choice. While groups like ROCU have
focused on protesting restaurant franchises over how they treat
workers, the dynamics of food-service are moving beyond actual
workers to off-the-shelf technology. More and more, people are
sitting at tables and punching their orders into iPads. As that
grows, minimum wage matters less, since there are fewer workers
to receive it.

Every person should hold a job that pays all the bills. The idea
of a working poor has always been an uncomfortable one for
American business, since it goes against the ideal that everyone
can make his own way, provided he follows his own work ethic.
Comfort can and should be the fruit of your labor.

But raising the minimum wage isn’t the magic bullet some interest
groups claim it to be. False rhetoric raises false hope and
doesn’t feed families. Profit growth, reinvestment and innovation
fuel job creation and an increase in wages, minimum or otherwise.
A better policy focus on those areas has a better chance to
dramatically alter poverty than the new math being peddled as
scientific fact.